Fidelity uses derivatives for income launch

Run by Michael Clark, the new fund will be based around the manager's £400m FIL Income Plus vehicle, with covered call options on a portion of holdings to generate additional income. Fidelity expects the instruments to produce added income of between 150% and 200% over the FTSE All-Share Index yield, which currently stands at 4.75%. Fidelity's derivatives director David Jehan will manage the covered call overlay strategy. While Fidelity admits a premium income may impact on the fund's capital returns in periods of rapidly rising markets, it says the vehicle will offer better long term...